We believe the social factor of environmental, social and governance (ESG) principles operates in concert with environmental and governance factors in areas relating to social determinants of health and wealth, diversity, equity and inclusion (DEI) and wellbeing.
It is important for employers to take action to inspire, motivate, engage and upskill their employees in line with ESG goals. Combined with the greater emphasis on ESG strategy, these efforts also bring about a shift in employer brand and culture, Total Rewards, employee engagement, and skills and work initiatives.
Companies that embrace their climate and governance strategies and meaningfully embed them into their culture, programs and employee experience achieve greater levels of employee engagement and performance.
To better understand the connection of social to the other two principal elements of ESG, consider the potential impacts of climate change on employee wellbeing. While wellbeing is considered a social factor of ESG, it both impacts and is impacted by environmental and governance factors.
There are four pillars of wellbeing: physical, emotional, financial and social. All four of these pillars maybe impacted by environmental and governance strategies. For example, climate change will certainly have an impact on people’s health, but will also impact their financial wellbeing as well through severe weather events, extreme heat, air pollution, changing ecologies, and increasing water and food insecurity.
This, in turn, reinforces the need for strong governance as employees with poor emotional or financial wellbeing may be more inclined to take risks and ignore governance protocols.
We have identified six key issues that contribute to the social element of ESG: